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Wednesday, April 6, 2011

The topline is expected to grow at a CAGR of 44% upto FY13E led by port business due to increase in port traffic and its strategic location. Besides, the port has state

‐of‐the‐art facilities and is expecting cargo diversion from the adjacent ports as they are running at near full capacities. Also it also enjoys flexibility in fixing tariffs. Therefore we expect its revenue from port business to increase significantly. The segment contributes to 15% of the total revenues.

Urban & Industrial Infrastructure

MARG has a huge land bank of 1802 acres which is expected to bring steady cash flow to the company. It is developing a 612 acre integrated township in Kancheepuram near Chennai with focus on light engineering and multi‐services apart from residential and social infrastructure. The company is planning to do a combination of sale and lease of land ‐area. The township will be ready in five‐six years and will contribute significantly to the revenues.

Apart from SEZ the company is also developing Junction Mall (7 acres), residential properties in OMR (Old Mahabalipuram Road ‐ the IT corridor of Chennai where the demand has been very strong) and other regions in Tamil Nadu. These projects are located in prime catchment areas of OMR and South Chennai and therefore we expect a strong demand going forward.

EPC division gaining a strong footing

EPC division is gaining a strong footing in both internal and external projects as reflected by its robust order book. Its order book increased substantially from Rs. 8.80 bn in FY09 to Rs. 51.5 bn YTD (of which 20% forms external component).

Valuation

We have valued MARG using SOTP at a fair value of Rs. 256/share. At CMP of Rs. 126/share, we see potential upside of 103% from current levels. We initiate coverage on the stock with 'BUY' recommendation.

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.

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